1. Taiwan Life Insurance Sector Outlook Susan Chu Director Financial Services Ratings Taiwan Ratings Corp.

2. Profile Update Life insurance sector accounts for 13% of Taiwan financial industry’s total assets Improving operating performance in 2003 Shifting dynamics amid accelerating deregulation

3. Outlook Outlook: negative Problems of negative spreads Challenges to grow new business Risks from rising operational flexibility Diverging financial strengths of individual companies

4. Problems of negative spreads

5. Structural mismatch Legacy of high guarantee rates, driven by rising competition along with deregulation Triggered by prevailing low interest rates and sluggish investment conditions How long will it take to solve the problem?

6. Challenges to grow new business Inflated growth? Last minute purchase Single premium Alternative investment Growth <> profit Interest rate dilemma

7. Challenges to grow new business Product Expensive rates for traditional products Difficulty to sell new products Channel Bancassurance yet to be proven Whether or not to join FHCs?

8. Risks from rising operational flexibility Deregulation Investment flexibility Lower assumed rates on policy reserves New products, such as investment-linked Other self-regulated schemes: RBC, bonus system...

9. Risks from rising operational flexibility Deregulation Investment Assumed rates New products Other self-regulated schemes Benefits and risks

10. Risks from rising operational flexibility Deregulation Investment Assumed rates New products Other self-regulated schemes Benefits and risks

11. Diverged financial strengths

12. Diverging financial strengths Business profile Market position (not market share) Management (capability of managing dynamic changes) Financial profile Operating performance Investment Capitalization

13. Negative outlook elsewhere No 1: US (31.3% in terms of 2002 global premium ) No 2: Japan (23.1%) No 3: UK (10.4%)..... No 12: Taiwan (1.3%)